T.C. Memo. 2000-278
UNITED STATES TAX COURT
SHIRLEY J. RANEY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18201-98. Filed August 30, 2000.
Shirley J. Raney, pro se.
J. Scot Simpson, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
RUWE, Judge: Respondent determined deficiencies in
petitioner’s Federal income taxes and additions to tax as
follows:
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Additions to Tax
Year Deficiency Sec. 6651(f) Sec. 6654(a)
1992 $2,226 $1,568 $91
1993 1,721 1,291 72
1994 4,237 1,741 109
1995 2,668 1,360 93
1996 2,126 1,498 106
The issues for decision are: (1) Whether petitioner
received taxable wage and pension income during each of the years
in issue; (2) whether petitioner is liable for additions to tax
under section 6651(f)1 for fraudulent failure to file income tax
returns for the years in issue; and (3) whether petitioner is
liable for the additions to tax under section 6654(a) for failure
to pay estimated tax for the years in issue.
When this case was called for trial, respondent moved,
pursuant to Rule 91(f), to compel petitioner to enter into a
proposed stipulation of facts. After hearing the parties on the
motion, we determined that there was no real dispute about the
facts proposed for stipulation and that there was no good reason
why the facts and exhibits attached to the stipulation should not
be made part of the evidentiary record. We therefore granted
respondent’s motion and deemed the matters contained in the
proposed stipulation to be facts for purposes of this case. See
Rule 91(f). After we granted the motion, the parties decided
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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that they would not call any witnesses, and the case was
submitted on the stipulated facts.
FINDINGS OF FACT
Petitioner resided in Tampa, Florida, at the time she filed
her petition. Petitioner was married and had no dependent
children during the years in issue.
During 1992, petitioner was employed by Wal-Mart and
Fireman’s Fund and received wage income from those employers in
the amounts of $1,196 and $16,644, respectively. During 1993,
petitioner was employed by Fireman’s Fund and received wage
income of $16,948. During 1994, petitioner was employed by
Fireman’s Fund, Montgomery Ward, Data Input Services, and
Physicians Healthcare and received wage income from those
employers in the amounts of $16,274, $1,782, $1,728, and $1,513,
respectively. During 1995, petitioner was employed by Physicians
Healthcare and Burns & Wilcox and received wage income from those
employers in the amounts of $10,839 and $6,564, respectively.
During 1996, petitioner was employed by Burns & Wilcox and the
U.S. Postal Service and received wage income from those employers
in the amounts of $5,326 and $14,765, respectively. Petitioner
received Forms W-2, Wage and Tax Statement, reflecting these
wages.
In 1992, petitioner received $1,368 from Fireman’s Fund
ESOP. In 1994, petitioner received $6,102 in pension income from
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The Bank of New York. In 1995, petitioner received $3,693 from
the Fireman’s Fund Retirement Plan.
Petitioner provided the Fireman’s Fund with Form W-4,
Employee’s Withholding Allowance Certificate, dated May 5, 1992,
on which she claimed 10 withholding allowances. Petitioner
provided Montgomery Ward with Form W-4, dated July 29, 1994, on
which she claimed eight withholding allowances. Petitioner
provided Data Input Services with Form W-4, dated October 10,
1994, on which she claimed eight withholding allowances.
Petitioner provided Physicians Healthcare with Form W-4, dated
November 28, 1994, on which she claimed eight withholding
allowances. Petitioner provided Burns & Wilcox with Form W-4,
dated July 19, 1995, on which she claimed eight withholding
allowances. Petitioner’s employers withheld Federal income taxes
from her wages in the amounts of $641.36, $0.00, $696.41,
$117.61, and $129.51 for the years 1992, 1993, 1994, 1995, and
1996, respectively. Petitioner made no estimated tax payments
for the years in issue.
Petitioner sent Forms 1040, U.S. Individual Income Tax
Return, to respondent for the years in issue. The Forms 1040
were received by the Internal Revenue Service on December 17,
1997. On those Forms 1040, petitioner reported no income.
Respondent did not accept the above-referenced Forms 1040 as tax
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returns. Petitioner has not filed any other income tax returns
for the years in issue.
In correspondence with respondent, petitioner indicated that
she did not believe that the tax laws required her to pay tax on
the income that she received. Petitioner continues to take that
position in her brief.
OPINION
Petitioner received wage income from various employers
during the years 1992, 1993, 1994, 1995, and 1996 in the
respective amounts of $17,840, $16,948, $21,297, $17,403, and
$20,091. Petitioner also received pension income during 1992,
1994, and 1995 in the respective amounts of $1,368, $6,102, and
$3,693.2 Petitioner generally argues that no act of Congress
authorizes taxation of these amounts. We disagree. All these
amounts constitute gross income under section 61. Petitioner’s
arguments to the contrary are wholly without merit and not worthy
of further analysis. We hold that petitioner has deficiencies in
income taxes in the amounts determined in the notice of
deficiency.
Respondent also determined that petitioner is liable for
additions to tax pursuant to section 6651(f) for fraudulent
2
In computing the amount of the deficiencies, respondent
determined that petitioner was liable for an increase in tax of
10 percent on the pension distributions pursuant to sec. 72(t).
Petitioner has not disputed this and offered no evidence on this
point.
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failure to file returns for each of the years in issue. The
existence of fraud is a question of fact to be resolved upon
consideration of the entire record. See Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978); Estate of Pittard v.
Commissioner, 69 T.C. 391 (1977). Fraud is not to be imputed or
presumed, but rather must be established by independent evidence
of fraudulent intent. See Beaver v. Commissioner, 55 T.C. 85, 92
(1970); Otsuki v. Commissioner, 53 T.C. 96 (1969). Fraud may not
be found under “circumstances which at the most create only
suspicion.” Davis v. Commissioner, 184 F.2d 86, 87 (10th Cir.
1950); Petzoldt v. Commissioner, 92 T.C. 661, 700 (1989).
A finding of fraud requires proof of specific intent to
evade a tax believed to be owing. If an understatement of tax
is caused by a good faith misunderstanding of the tax laws, the
understatement would not be due to fraud. See Niedringhaus v.
Commissioner, 99 T.C. 202, 217 (1992). A good faith
misunderstanding for this purpose can exist even if the
misunderstanding is objectively unreasonable. See id. at 216-
217. We have cautioned, however, that a good faith
misunderstanding of the law is different from disagreement with
the law or a belief that the law is or may be unconstitutional.
See id. at 217-218.
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The main thrust of petitioner’s position in this case is
that the tax laws do not require her to pay taxes on the income
that she received. While we believe that petitioner’s position
is objectively unreasonable, the sparse evidence in the record
before us does not clearly and convincingly negate petitioner’s
implicit claim that she was acting on her good faith
understanding of the law. Of course, we may question whether
petitioner’s purported misunderstanding of the law was the
product of good faith. However, suspicions, no matter how
strong, are not a substitute for evidence.3 See id. at 210.
Respondent bears the burden of proving fraudulent intent by clear
and convincing evidence. See sec. 7454(a); Rule 142(b).
Respondent has not done so. We therefore hold that petitioner is
not liable for the additions to tax under section 6651(f).4
Petitioner bears the burden of proof regarding the section
6654(a) additions to tax for failure to pay estimated tax.
Petitioner offered no evidence regarding the section 6654(a)
3
The record before us contains no evidence of petitioner’s
business experience, educational background, prior history of
filing income tax returns, or dealings with the Internal Revenue
Service, prior to 1992.
4
In respondent’s brief, he requests that we, on our own
motion, impose an additional penalty under sec. 6673. Given the
fact that petitioner has prevailed on the sec. 6651(f) issue, we
decline respondent’s invitation.
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additions to tax, nor did she address this issue in her brief.
We therefore uphold respondent’s determination on this issue.
Decision will be entered
for respondent with respect
to the deficiencies and the
additions to tax under section
6654(a) and for petitioner
with respect to the additions
to tax under section 6651(f).